M&A: 2025 in Review and a Look Ahead to 2026

At the end of 2024, predictions across the dealmaking industry were broadly optimistic: due to an anticipated combination of loosening financial conditions, a pro-deal regulatory environment from a change in administration and record levels of “dry powder” cash ready to deploy, 2025 was expected to be a transactional boom.

While the year ultimately delivered strong (and in many cases, record-setting) results, the aggregate numbers somewhat obscure the more complex story of the 2025 M&A market. A series of fits and starts challenged M&A during the first half of the year, with slower than expected activity in the first two months before dealmaking began to pick up in March. Just as the recovery was building energy, fallout from tariff plans announced by the Trump administration in April created uncertainty across the globe that sidetracked deals, sparked worries about inflation and led to the Federal Reserve delaying its interest rate reduction program until September. Nevertheless, GDP and earnings growth proved resilient and eventual rate cuts plus broad easing of financing conditions lowered the opportunity cost of pursuing bold transactions. Volatility and uncertainty in the first half of 2025 gave way to resurgence and renewed confidence in the second half of the year, leaving the industry once again optimistic that the year ahead will be another for the record books.

• Return of the Mega Deal. The U.S. M&A market saw the biggest surge of mega deals (or transactions valued in excess of $10 billion) in the last decade. More impressively, 2025 saw 11 transactions announced with values upward of $30 billion, compared to seven transactions valued at $30 billion or more in 2024 and four in 2023. The aggregate value of deals surpassed $2 trillion in 2025, the highest in value terms since 2021. The boom in mega deals is an important signal that—beyond just executing on long-planned transactions—boards, investors and companies are seeing favorable conditions for the kinds of ambitious and imaginative deals that transform not just companies but the market as a whole. Mega deals boomed across industries—from media and entertainment (the $55 billion Electronic Arts buyout and the $80+ billion bidding war for Warner Bros. Discovery), to transportation (Union Pacific and Norfolk Southern’s $85 billion merger) to tech (Google’s $23 billion acquisition of Wiz and Palo Alto Networks’ $25 billion acquisition of Cyberark)—signaling a fundamental shift in boardroom sentiment and willingness to take big swings boards otherwise may not have taken a year ago.
• AI as “Super Sector.” While the technology, industrials and healthcare sectors all saw historic dealmaking levels in 2025, the year’s biggest growth story was the artificial intelligence boom. From SoftBank’s $40 billion investment in OpenAI to massive infrastructure commitments like the $500 billion Stargate Project, major AI-related transactions defined the year. Enthusiasm for AI-related investment and transactions does not appear to be slowing down, and AI infrastructure, platform consolidation and strategic partnerships are expected to continue to drive deal activity in 2026. The critical constraint for AI dealmaking has shifted from chip availability to power availability; as a result, M&A in the energy and utilities sectors has become intrinsically linked to the AI super sector’s growth. AI’s interconnectedness has also reached into the credit sector; the unprecedented wave of bond issuance by hyperscalers to fund data centers, exceeding $120 billion in 2025 (with over $90 billion in new debt since September 2025), adds a layer of credit risk and scrutiny that was less prevalent in 2024. This space warrants close attention as it continues to capture an increasingly large part of the economy.
• Private Equity: Big Deals Return, but Exit Pressures Persist. While sponsors continue to sit on significant dry powder and private equity transactions still fall short of the all-time high volume seen in the pandemic era, we are nevertheless seeing the return of mega deals in private equity as sponsors focus on larger, higher-value transactions. The $55 billion EA buyout led by Silver Lake, Saudi Arabia’s Public Investment Fund and Jared Kushner’s Affinity Partners—the largest private equity buyout of all time—and Sycamore Partners’ $23.7 billion leveraged buyout of Walgreens Boots Alliance, taking the company private and ending its almost 100-year run as a public company, demonstrated that sponsors have more confidence in navigating the regulatory environment and are willing to pursue massive, complex, high-profile transactions. On the one hand, this momentum is a cause for confidence and, as we noted in our 2025 memo,[1] robust private equity activity is an important driver of overall M&A activity. On the other hand, there are reasons for caution; while exit values have begun to rise year-over-year since post-pandemic lows, the industry is still grappling with a record backlog of aging portfolio companies and median hold times that remain above historical norms, forcing sponsors to rely on continuation vehicles for liquidity more frequently than they (and their limited partners) might otherwise prefer.
  
  We expect 2026 to see continued pursuit of transformative transactions, particularly if interest rates continue to decline and the valuation gap between buyers and sellers continues to narrow. Sponsor-to-sponsor deals will remain critical to clearing the exit backlog and traditional exit channels—IPOs and strategic sales—should improve modestly as market conditions normalize. Alternative liquidity tools, including dividend recaps, NAV financing, large rollovers and single-asset and multi-asset continuation funds, will continue to play a supporting role but cannot fully substitute for traditional exits over the long term.
• Sovereign Wealth Funds: A New Force in Dealmaking. Sovereign wealth funds appear to be changing their investment strategies and are more aggressive than they were two or three years ago, as Middle Eastern countries continue to diversify their holdings beyond oil. The EA deal was a bellwether: sovereign wealth funds are becoming more assertive players in large-scale M&A and are willing to deploy substantial capital alongside traditional private equity sponsors. Subject to CFIUS and other foreign direct investment regulatory considerations, sovereign wealth funds are looking to take a more active role in management commensurate with the size of their equity checks. This activity represents a substantial amount of capital that can reshape the deal market, and so far, these funds seem very comfortable deploying it, notwithstanding increasing FDI regulation.[2] This trend is likely to accelerate in 2026, potentially reshaping competitive dynamics for mega deals. Boards should anticipate sovereign wealth funds as increasingly common bidders and co-investors, particularly in technology, infrastructure and other strategic sectors.
• Regulatory Landscape: Elevated Scrutiny with Practical Pathways. Relative to the prior administration, antitrust regulators have generally moved toward a more pro-deal tenor. Regulators have returned to a more traditional antitrust agenda, with agency attention focused on market definitions, more traditional definitions of competitive harm and a renewed receptiveness to behavioral and structural remedies to problematic transactions (such as requiring the divestiture of specific assets or business units).
  
  Moreover, some dealmakers and executives have seen a benefit from advocating directly to the executive branch. With regulatory agencies being seen as increasingly responsive to political imperatives (including encouraging deals), companies are more willing to take a swing at deals that merge direct competitors. This dynamic creates both opportunity and risk. While there may be pathways to approval for deals that would have faced significant obstacles in the prior administration, parties should not assume that political intervention is a reliable strategy. Dealmakers should continue to expect rigorous antitrust enforcement, particularly in concentrated industries and transactions involving data, digital platforms or supply chain implications, and should continue to invest in “fix it first” strategies as they pursue their regulatory planning. Elevated antitrust reverse termination fees, long outside dates and heavily negotiated regulatory covenants, which became de rigueur in the prior administration, are likely to remain features of the current deal cycle.[3]

As we enter 2026, the momentum from 2025’s M&A boom is expected to continue, supported by improving macroeconomic conditions (including anticipated further interest cuts), more predictable regulatory enforcement, substantial private equity dry powder, a spike in lending as Wall Street’s appetite for debt increases, increased boardroom confidence and enthusiasm and the potential emergence of sovereign wealth funds as major players. Yet challenges remain: circular AI deal structures warrant scrutiny, exit pressures persist for private equity and the regulatory environment—while more deal-friendly—remains rigorous and at times unpredictable. Ultimately, the leading catalyst for near-term activity is the desire to move decisively on strategic priorities and complete transactions while the current environment remains favorable. This sense of urgency, fueled by the perception that the current window may not remain open indefinitely, is likely to drive deal velocity through the first half of 2026.

[1] Our 2025 memo on M&A and activism is available here.

[2] For additional information on CFIUS and FDI, see our trade controls article elsewhere in this memorandum.

[3] For additional information on antitrust regulation, see our antitrust article elsewhere in this memorandum.